Sjc.all.

Market Report
Silicon Valley
www.colliers.com/sanjose
Send In The Jobs
OVERVIEW
The Silicon Valley, and the rest of the country for that matter, is in need of job creation. The U.S.
Department of Labor reported its most recent unemployment rate for the Valley in September at
11.2%, down from this year’s peak of 12.4% reported in January. Although this figure has been slowly
decreasing, it remains painfully high. For comparison, California’s unemployment rate weighed in at
12.4%, also reported in September, which is the second highest only to Michigan nationally. Gross
Domestic Product, in its final second quarter estimate, was revised to a sluggish 1.7% and Q3 GDP
improved slightly, to 2.0%. Forecasts for a painfully slow recovery seem to be panning out.
Silicon Valley leasing and user sale activity (gross absorption) for the third quarter of 2010 totaled
4.85 million square feet, down 11.7% from the 5.49 million square feet of gross absorption in Q2.
Still, results over the most recent four quarters are much improved from earlier results. Since Q4
2009, total gross absorption has measured 20.56 million square feet; this eclipse of the 20-million
square foot barrier is a significant achievement. To compare, gross absorption for the prior four
quarters (Q4 2008 - Q3 2009) totaled 13.89 million square feet and 2009 total gross absorption
checked in at 16.10 million square feet. At the current pace, 2010 total gross absorption stands to
surpass the 18.0 million square feet that Colliers forecasted and could surpass 20.0 million square
feet with a strong fourth-quarter push.
Gross absorption only tells half the story, however. The availability rate for the Silicon Valley
across all product types rose to 18.6% in Q3 2010 from 18.3% in Q2. Availability rates remain
elevated as compared to pre-recession levels and continue to rise albeit very slowly. Fortunately,
the amount of space being vacated and coming on the market has subsided somewhat, so total
space available has begun to plateau. Presently, there is 58.40 million square feet of office, R&D,
industrial and warehouse space available in Silicon Valley, 1.9% more than the 57.30 million square
feet available at the end of the third quarter of 2009.
The dichotomy between increasing gross absorption and elevated availability underscores the
problem with this recovery or lack thereof. As uncertainty has faded, activity has picked up and
companies are more willing to make long term leasing commitments. At the same time, venture
capital investment has not come to the rescue. PricewaterhouseCoopers’ most recent venture capital
numbers showed that venture capital investment in Silicon Valley fell 42% from $3.03 billion in Q2 to
$1.75 billion in Q3. For comparison, Q3 2009’s VC investment totaled $2.37 billion. However, some
promising VC investment signs did occur this quarter with early-stage financing weighing in with a
35% increase nationwide.
Starting rents in Q3 for office, R&D and industrial product types increased slightly in select markets.
While submarkets like Cupertino, Mountain View and Palo Alto are experiencing rental growth,
Fremont, North San Jose and Santa Clara are doing their best to maintain the status quo.
Q3 2010 | Silicon Valley
Q2 2010 Q3 2010
Availability Rate 18.30% 18.60%
Gross Absorption 5,488,064 SF 4,763,572 SF
Net Absorption (1,321,902) SF (2,017,253) SF
market indicators
Silicon Valley availability
Silicon Valley Gross Absorption
Office
Industrial
Warehouse
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Gross Absorption
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Gross Absorption
Q2-10
Q3-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Vacancy Rate Availability RateAvg.Starting Rent
SquareFeetinMillions
3
1
2
0
R&D Office Industrial Warehouse
3
1
2
0
ALL
Product
Vacancy Rate Availability Rate
0.00%
3.00%
6.00%
9.00%
12.00%
15.00%
18.00%
$0.00
$1.00
$2.00
$3.00
$4.00
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
0.00%
3.00%
6.00%
9.00%
12.00%
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Office
Industrial
Warehouse
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Gross Absorption
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Gross Absorption
Q2-10
Q3-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
3
1
2
0
3
1
2
0
ALL
Product
0.00%
3.00%
6.00%
9.00%
12.00%
15.00%
18.00%
$0.00
$1.00
$2.00
$3.00
$4.00
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
0.00%
3.00%
6.00%
9.00%
12.00%
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10

The availability rate for Silicon Valley’s R&D
sector declined negligibly in Q3, dropping from
20.56% to 20.52% during the quarter.
Available R&D supply now totals 32.46 million
square feet, nearly unchanged from the 32.53
million square feet available at mid-year. Since
the end of 2007, available inventory in the
R&D sector has grown from 25.76 million
square feet (16.3% availability rate) to its
bloated current inventory of nearly 32.46
million square feet.
R&D activity remains low relative to pre-
recession levels. Average R&D demand per
quarter in 2010 is 1.99 million square feet,
compared to an average of just over 3.05
million square feet per quarter in 2007. Still,
that is a vast improvement from the 2009
average of 1.63 million square feet per quarter
and the 2009 rock bottom, when sputtering
R&D demand only hit 1.25 million square feet
in the year’s second quarter.
R&D occupancy fell by 566,951 square feet in
Q3. This figure is much improved when
compared with Q2’s 1.64-million-square-foot
occupancy loss. “Improvement” is also revealed
in the first three quarters of 2010, which
realized an R&D occupancy loss of 3.16 million
square feet compared to a 5.34-million-square-
foot loss in the first three quarters of 2009.
Aiding the overall balance, the amount of R&D
rollover space (preimproved space added to
supply) decreased by 31% to 2.52 million
square feet from Q2 to Q3. This sizeable
reduction along with 1.95 million square feet of
gross absorption contributed to the improved
net absorption results. However, this was still
the R&D sector’s eighth consecutive quarter of
negative net absorption.
San Jose and Sunnyvale generated the most
gross absorption of the five major R&D markets
in Q3. San Jose’s R&D activity weighed in at
582,430 square feet and Sunnyvale’s R&D gross
absorption totaled 352,397 square feet. These
two markets combined to generate 48% of the
R&D market’s total leasing and user-sale activity
in Q3. San Jose, which is the Valley’s largest
R&D market with a building base of 47.4 million
square feet, broke out of its seven-quarter
streak of occupancy losses by producing
193,864 square feet of positive R&D net
absorption. Sunnyvale continued its second
consecutive quarter of occupancy gains with a
nominal 5,026 square-foot increase.
For Q3 2010, R&D activity measured to
1.95 million square feet just 78,186 square
feet less than Q2’s figure of 2.03 million
square feet. For the year, R&D gross
absorption stands at 5.96 million square
feet and Colliers 7.5-million-square-foot
forecast should be realized.
Leasing ACTIVITY
Selected Colliers International TRANSACTIONS - Q3 2010
Property Address SQUARE FEET Landlord TENANT TYPE
2070 S. 7th Street, San Jose 99,000 Chaboya Ranch Leales Fleet RV, Inc.
Warehouse
Lease
1455-1473 N. Milpitas Blvd., Milpitas 41,082 Milpitas 10 Uni-Fab Industries, Inc.
Industrial
Lease Renewal
48368 Milmont Drive, Fremont 40,320 AMB Property Corporation Holman Plastics, Inc.
Warehouse
Lease Renewal/Extension
1070 Commercial Street, San Jose 35,324 CSBC, LLC Carrier Sales & Distribution
Industrial
Lease
4255 Burton Drive, Santa Clara 31,676 Washcop Limited Partners Document Capture Technologies
R&D
Lease
R&D Availability & Rent Trends
R&D
Office
Industrial
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
$0.00
$0.50
$1.00
$1.50
$2.00
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
$0.00
$1.00
$2.00
$3.00
$4.00
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
R&D
p. 2 | Colliers International
research & forecast report | Q3 2010 | Silicon Valley

Santa Clara experienced an increase
in R&D activity, to 179,077 square
feet in Q3 from 124,654 square feet
in Q2. However, its net absorption
weighed in at a negative 365,744
square feet due to an increase of
space added to available supply. The
Fremont and Mountain View markets
experienced drops in both activity
and occupancy in Q3. Fremont’s
R&D activity fell by 49%, from
335,547 in Q2 to 171,105 square feet
in Q3 and occupancy was down
208,341 square feet. Mountain
View’s R&D activity dropped from
310,255 square feet in Q2 to 100,657
square feet in Q3, realizing an
occupancy loss measuring 136,558
square feet. Palo Alto’s R&D market
fared better with 122,473 square feet of
occupancy gain after five consecutive quarters
in the red.
Significant R&D activity during the most recent
quarter included AOL’s large 224,852-square-
foot sublease at 395 Page Mill Road in Palo Alto,
and NuvoSun occupying 102,436 square feet on
Barber Lane in Milpitas for their new corporate
headquarters.
Although Q3 R&D starting rents increased overall,
they were impacted by two anomalies, the
500,000-square-foot NVIDIA renewal on San
Tomas Expressway in Santa Clara and AOL’s
224,852-square-foot sublease at 395 Page Mill
Road in Palo Alto. After removing these two deals
from the our weighted average formulas, R&D
starting rents still demonstrated a significant
increase to $1.14 per square foot NNN in the
year’s third quarter. This increase is closely
tied to the observations made earlier that
more-favored submarkets and higher quality
product are garnering the bulk of
the current demand.
Office
The Silicon Valley office market was
not able to sustain the much-
improved gross absorption results of
Q2. In Q3, just over one million
square feet of office gross absorption
was generated, which translates to a
48% decrease from Q2’s figure of
2.07 million square feet. It is,
however, the fourth consecutive
quarter of office activity above one
With much of the Valley’s activity
being lateral movement of existing
tenants, strong net absorption in one
quarter can be a forbearer to an occupancy loss
in the next quarter as those users vacate their
prior facilities. That appears to have been the
case for the office sector in Q3. 1.78 million
square feet of preimproved office space was
added back into the market in Q3 2010, an
increase of 12% from Q2’s 1.59 million square
feet. This rollover space added to available supply
in Q3 was the highest amount recorded since it
peaked at 2.26 million square feet in Q2 2009.
As a result of lower demand and increasing
supply, net absorption weighed in at negative
690,105 for the office sector in Q3, compared
to positive 483,557 square feet in Q2. It was
the largest occupancy loss in the office sector
since Q2 2009. In the last four quarters the
office sector has experienced two quarters of
Over the last four quarters, office gross
absorption totals 5.84 million square
feet, a marked improvement over the
3.38 million square feet recorded in the
previous four quarters. Colliers
forecasted that total office activity
would be in the 4.5 million square foot
range in 2010 and with 4.47 million
square feet already in the books, that
number sure to be beat.
Office Availability & Rent Trends
Office
Industrial
Warehouse
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Gross Absorption
Q2-10
Q3-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
3
1
2
0
ALL
Product
12.00%
15.00%
18.00%
$0.00
$0.50
$1.00
$1.50
0.00%
5.00%
10.00%
15.00%
20.00%
$0.00
$1.00
$2.00
$3.00
$4.00
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
0.00%
3.00%
6.00%
9.00%
12.00%
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Leasing ACTIVITY
600 W. California Avenue, Sunnyvale 28,023 Synopsys, Inc. Ironkey Real Estate
Office
Sublease
25 Metro Drive, San Jose 25,621 Equity Office Properties Trust Virtual Instruments
Office
Lease
2071 Ringwood Avenue, San Jose 25,026 Lasecke Trust Akeena Solar, Inc.
Warehouse
Lease
3099 N. First Street, San Jose 20,710 Embarcadero Capital Partners Taseon, Inc.
Office
Lease Renewal
765 Montague Expressway, Milpitas 19,200 SCS Development West Coast Office
Warehouse
Lease

positive net absorption and two quarters of
negative net absorption. All told for the last
twelve months, Colliers’ figures indicate that
office occupancy is down by only 135,533
square feet.
The Valley’s office availability rate increased
from 24.1% at the end of Q2 (14.71 million square
feet) to 25.7% (15.70 million square feet) in Q3.
This figure represents the largest amount of
available office space on record for the Silicon
Valley, rivaled only by Q3 2009’s figure of 15.25
Of all the office submarkets, San Jose and
Santa Clara were the largest contributors to
gross absorption in Q3. Although San Jose
produced the most leasing and user sale
activity in the Valley totaling 352,687 square
feet, it was a far cry from the 869,342 square
feet of new office demand generated in Q2.
Santa Clara, which produced the second-
highest gross absorption figure for the region,
dropped slightly from 287,281 square feet in
Q2 to 244,087 square feet in Q3.
Significant office deals that took place in Q3
included Tellabs 77,149-square-foot lease on
Great America Parkway in Santa Clara; Skype’s
90,000-square-foot lease on Porter Drive
located in Palo Alto’s Stanford Research Park;
and Apple’s 79,382-square-foot lease on
Stevens Creek Boulevard in Cupertino.
Starting office rents increased overall in Q3;
however, this is also a tale of two building
classes. While 2009 activity was centered on
Class B product, much of the current activity is
focused on higher-quality buildings in tighter
submarkets. Colliers had forecasted that office
starting rents would stabilize in 2010 due in
large part to this demand shift. In the most
recent quarter, higher rents for Class A
transactions more than offset the flat rents at
lesser quality buildings in Silicon Valley. As a
result, average starting rents for office deals
increased to $2.56 per square foot, full service
during the quarter, nearly a 12% increase from
the average reported one quarter earlier.
Industrial
The Valley generated 864,451 square feet of
industrial gross absorption in Q3, the most of any
quarter so far this year and 28.3% more than the
673,936 square feet measured in Q2. While
In part, industrial demand has picked up
because user-sale activity is much
improved from 2009. Small Business
Administration (SBA) financing is readily
available, some unfortunate owners have
been forced to sell and the economy has
stabilized enough for buyers to venture
back into the market. Using Colliers’ own
industrial transactions as a benchmark,
there has been a threefold increase in
industrial sales activity during the first
three quarters of 2010 compared to the
first three quarters of 2009.
Industrial Availability & Rent Trends
R&D
Office
Industrial
Warehouse
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Gross Absorption
Q2-10
Q3-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
3
1
2
0
$0.00
$0.50
$1.00
$1.50
$2.00
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
$0.00
$1.00
$2.00
$3.00
$4.00
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
0.00%
3.00%
6.00%
9.00%
12.00%
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Leasing ACTIVITY
47241 Bayside Parkway, Fremont 36,576 JER Bayside, LLC Kimball Internatioanl, Inc
R&D
Lease Renewal
600 W. California Avenue, Sunnyvale 28,023 Legacy / PFG Ironkey Real Estate
Office
Lease
25 Metro Drive, San Jose 25,621 Equity Office Properties Trust Virtual Instruments
Office
Lease
2071 Ringwood Avenue, San Jose 25,026 Lasecke Trust Akeena Solar, Inc.
Warehouse
Lease
1959 Concourse Drive, San Jose 18,152 Westcore Properties KSM Corporation
R&D
Lease

industrial activity has increased in
each quarter of 2010, the 2.20-million-
square-foot, year-to-date total still has
some catching up to do in order to
reach the 3.50 million square feet
Colliers forecasted for the year. While
we will probably fall shy of that
forecast as a result of the slow start to
2010, the Q3 results are encouraging.
Not only was demand the highest so
far this year, but it exceeded industrial
gross absorption tallies in every
quarter except one (Q4 2009) dating
back to the third quarter of 2008.
Silicon Valley’s supply of available
industrial space increased slightly in
Q3 to 6.46 million square feet from
Q2’s figure of 6.36 million square
feet. The industrial sector’s availability rate
increased from 11.3% in Q2 to 11.5% in Q3. The
highest availability rate recorded so far this year
was Q1’s figure of 12.4%. The industrial availability
rate has generally fluctuated between 11.0% and
13.0% since Q1 2009 and that trend continued in
Q3 2010.
The amount of preimproved industrial space that
came onto the market in Q3 totaled 1.29 million
square feet. This is up significantly from the
676,000 square feet of industrial space that was
added to available industrial supply in Q2 but it is
not out of line for other recent quarters. The
increased supply pipeline of Q3 counteracted
the gains in demand and combined to produce a
third quarter industrial occupancy loss of
422,226 square feet. It was the thirteenth time
in the last fourteen quarters that net absorption
has been negative in the industrial sector.
Of the major industrial markets in Silicon Valley,
San Jose, Santa Clara and Milpitas generated
the bulk of the industrial gross absorption in
Q3. San Jose posted 279,370 square feet of
industrial activity. However, this amount was
not enough to offset the 616,376 square feet of
space added to the market. Santa
Clara generated 242,797 square
feet of industrial activity. This
figure represents the most
industrial activity for that city since
Q4 2007. Santa Clara posted
positive net absorption during the
quarter, albeit a paltry 9,348 square
feet. Milpitas generated 243,492
square feet of industrial gross
absorption in Q3, just enough to
push that city’s industrial net
absorption tally into the black for
the quarter.
Starting rents for industrial deals in
Silicon Valley averaged $0.62 per
square foot NNN in Q3, slightly
higher than the $0.55 average for
Q2. This increase for industrial starting rents is
welcome news for landlords, considering that
this figure has not risen above $0.60 per square
foot since Q4 2009.
Warehouse
The warehouse market experienced its second
straight quarter of increased gross absorption,
rising 33% from 710,804 square feet in Q2 to
944,355 square feet in Q3. This represents the
greatest level of activity recorded for the year and
the second-largest quarterly gross absorption
tally since Q4 2009’s figure of 1.05 million square
feet. Despite its slow start, year-to-date
warehouse activity now totals 2.12 million square
feet, an increase of 67% over the same period of
2009 (1.27 million square feet). Barring a dreadful
Warehouse Availability & Rent Trends Warehouse
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Gross Absorption
Q2-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Gross Absorption
Q2-10
Q3-10
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
3
1
2
0
3
1
2
0
ALL
Product
0.00%
3.00%
6.00%
9.00%
12.00%
15.00%
18.00%
$0.00
$0.20
$0.40
$0.60
0.00%
2.00%
4.00%
6.00%
8.00%
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
0.00%
3.00%
6.00%
9.00%
12.00%
Q3-10
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Sales ACTIVITY
Property Address SQUARE FEET Seller Buyer TYPE
5755 Rossi Lane, Gilroy 120,665 E.J. Rossi, LLC Pulmuone Wildwood, Inc.
Industrial
User Sale
1453 - 1509 N. Milpitas Blvd., Milpitas 100,368 Don Pearlman Joint Ventures VII Realty Associates Advisors, LLC
Industrial
Investment Sale
1105 McKay Drive, San Jose 47,100 NXP Semiconductor USA Spec Investments, LLC
R&D
Investment Sale
1255 Arques Avenue, Sunnyvale 40,200 Fujitsu Management Services ISE Labs, Inc.
R&D
User Sale
374 Reed Street, Santa Clara 14,287 Sarpa-Feldman Enterprises, Inc. Accel Air Systems
Industrial
User Sale
Warehouse starting rents for deals
completed in Q3 decreased from $0.44 per
square foot, NNN, to $0.42 per square foot.
We expect warehouse rents to remain flat
over the duration of 2010, above the $0.40
NNN mark.

united states:
San Jose/Silicon Valley
450 West Santa Clara Street
San Jose, CA 95113
United States
tel 408 282 3800
FAX 408 292 8100
CA License No. 00490878
480 offices in
61 countries on
6 continents
United States: 135
Canada: 39
Latin America: 17
Asia Pacific: 194
EMEA: 95
• $1.9 billion in annual revenue
• 2.4 billion square feet under
management
• Over 15,000 professionals
This report and other research materials
may be found on our at www.colliers.com/
sanjose. This is a research document of Colliers
International – San Jose, CA. Questions related
to information herein should be directed
to the Research Department at 408 282
3800. Information contained herein has been
obtained from sources deemed reliable and
no representation is made as to the accuracy
thereof. Colliers International is a worldwide
affiliation of independently owned and operated
companies, with over 480 offices throughout
61 countries.
Accelerating success.
Contributing Authors:
Jeff Fredericks
Senior Managing Partner
jeff.fredericks@colliers.com
tel 408 282 3801
Terry Wang
Research Project Manager
terry.wang@colliers.com
tel 408 282 3898
Understanding
Absorption
Change in Availability: This measurement is simply
the difference between the amounts of space available
at the end of one period to the next. The table below
shows that total available space increased by 857,303
square feet in the year’s Third Quarter. Note that
“change in availability” includes adjustments for space
that is “taken off the market”. Space “taken off the
market” is not a factor in net absorption measurements.
Total Available end of 2Q10 57,544,576
Plus: Vacant & Occupied Space
that came available in 3Q10 5,751,317
Plus: New Shell added in 3Q10 0
2Q10 Available + Newly Available in 3Q10 63,295,893
Less: 3Q10 Gross Absorption -4,846,483
Less: 3Q10 Taken off the Market -47,531
Total Available end of 3Q10 58,401,879
Colliers uses several measurements to
track market conditions and deal flow. While
related, the formulas to arrive at these
measurements differ. Using the results
of the most recent quarter, here is how
Colliers measures change in availability, net
absorption and effective net absorption.
Q4, warehouse gross absorption should surpass our
2010 forecast of 2.50 million square feet.
Silicon Valley’s warehouse availability rate has been
bouncing above and below 10% for nearly two
years. After three straight quarterly increases, the
warehouse availability rate dropped back below
10.0% in Q3, to 9.8% (representing 3.78 million
square feet of available warehouse space). By
comparison, at the same time last year, warehouse
availability stood at 4.07 million square feet or a
10.5% availability rate.
Preimproved warehouse space added to supply
increased 12.9% from the previous quarter from
876,844 square feet to 989,676 square feet. Year-
to-date however, the amount of warehouse space
rolling over and coming to market is on par with
2009. In the first three quarters of 2010, 2.69 million
square feet of preimproved space has come to
market, compared to 2.79 million square feet in the
first three quarters of 2009.
San Jose accounted for 30% of Silicon Valley’s
warehouse gross absorption in Q3, totaling 278,819
square feet. Milpitas also registered a sizeable
204,814 square feet of warehouse gross absorption
during the quarter. The warehouse markets that
realized occupancy gains in Q3 included Santa Clara
with 72,689 square feet of net absorption and
Sunnyvale with 68,190 square feet. This is in
contrast to San Jose and Milpitas that each realized
occupancy losses in Q3 of 95,121 square feet and
71,587 square feet respectively.
Noteworthy transactions in San Jose during the
quarter included Leales Fleet RV signing a deal for
99,000 square feet on South 7th Street and Owens
Corning Fiberglass, which leased two buildings on
Berryessa Road totaling 127,125 square feet.
Milpitas’ gross absorption numbers include a
102,407-square-foot lease by Extron Partners on
South Abbot Avenue.
Warehouse starting rents for deals completed in
Q3 decreased from $0.44 to $0.42 per square
foot, NNN. We expect warehouse rents to remain
flat over the duration of 2010, above the $0.40
NNN mark.
Net Absorption: Net absorption measures the change
in occupied space from one period to the next. In this
measurement, it is important to distinguish that a building
may be “available”, but not vacant (often the case in a
sublease situation, for example). Therefore, occupancy
is not reduced (negative net absorption) until the space
is vacated, and sometimes that does not happen until
the space is leased, creating a net absorption “wash” for
the deal and for that particular period.
New Vacant Space that came available 3Q10 -4,293,024
Previously Available Space that
was vacated in 3Q10 -2,278,062
3Q10 Total Vacant added (Occupancy Loss) -6,571,086

3Q10 Gross Absorption (occupancy gain) 4,846,483
3Q10 Net Absorption (change in Occupancy) -1,724,603
Effective Net Absorption: In 2003, Colliers created a
measurement of “effective net absorption”. Effective
net absorption uses the same formula as the net
absorption formula, except that it treats any space that
comes available as if it is vacant, whether it is or it isn’t.
The purpose of the measurement is to get a better “real
time” gauge of occupancy flow in and out of the market,
acknowledging that space that is available for lease is
likely to be vacated shortly and presently underutilized.
New Vacant Space that came available 3Q10 -4,293,024
Occupied Space that came available 3Q10 -1,458,293
3Q10 Total Available added -5,751,317

3Q10 Gross Absorption 4,846,483
3Q10 Effective Net Absorption -904,834

OFFICE MARKET STATISTICS
Third QUARTER 2010
EXISTING PROPERTIES VACANT AVAILABLE OCCUPIED AVAILABLE TOTAL AVAILABILITY NET ABSORPTION CONSTRUCTION RENT
Type Bldgs
Total Inventory
Sq Ft
Direct Vacant
Sublease
Vacant
Direct Occupied
Sublease
Occupied
Sq Ft
Rate
Q3-2010
Rate
Q2-2010
Q2-2010 YTD
Completed
Q3-2010
Under
Constr
FS
Wtd Avg
Asking
S U B MA R KET S

CAMPBELL / LOS GATOS
A 19 1,123,609 247,793 17,818 47,437 - 313,048 27.9% 24.5% (51,768) (23,150) - 3,257 $2.41
B 89 1,705,002 280,382 3,171 107,639 - 391,192 22.9% 23.7% (6,826) (23,014) - - $1.98
C 13 172,155 44,094 - 3,650 - 47,744 27.7% 23.8% (7,470) (12,634) - - $1.64
TOTAL 121 3,000,766 572,269 20,989 158,726 - 751,984 25.1% 24.0% (66,064) (58,798) - 3,257 $2.17

CUPERTINO / SARATOGA
A 8 734,525 51,551 83,946 7,337 - 142,834 19.4% 16.0% (24,962) 55,994 - $3.00
B 83 2,530,294 285,758 50,744 26,078 - 362,580 14.3% 13.6% (28,945) (102,050) - - $2.65
C 22 290,394 14,122 - - - 14,122 4.9% 3.8% (3,172) (6,962) - - $2.19
TOTAL 112 3,555,213 351,431 134,690 33,415 - 519,536 14.6% 13.3% (57,079) (53,018) - - $2.71

FREMONT / MILPITAS
A 15 805,847 293,788 11,483 36,597 24,892 366,760 45.5% 41.3% (34,120) (94,032) - - $1.93
B 38 1,218,040 264,100 14,139 50,749 2,750 331,738 27.2% 23.5% (49,444) (48,447) - - $1.66
C 35 636,178 69,054 - - - 69,054 10.9% 9.8% (8,200) (11,692) - - $1.64
TOTAL 88 2,660,065 626,942 25,622 87,346 27,642 767,552 28.9% 25.6% (91,764) (154,171) - - $1.80

GILROY / MORGAN HILL
A 16 311,036 37,389 - 32,344 - 69,733 22.4% 24.3% 5,945 (1,208) - - $2.29
B 7 120,088 52,280 - - - 52,280 43.5% 43.5% - (2,640) - - $1.97
C 29 285,730 58,278 - 3,300 - 61,578 21.6% 20.2% (5,214) 2,684 - - $1.35
TOTAL 52 716,854 147,947 - 35,644 - 183,591 25.6% 25.9% 731 (1,164) - - $2.19

LOS ALTOS
A 9 231,534 103,414 - - - 103,414 44.7% 46.0% 2,979 (93,376) - - $3.62
B 18 380,906 69,212 3,740 13,790 - 86,742 22.8% 20.9% (9,320) 101,027 - - $2.98
C 39 498,356 24,941 214 - - 25,155 5.0% 5.0% (6) (94,545) - - $2.92
TOTAL 66 1,110,796 197,567 3,954 13,790 - 215,311 19.4% 19.0% (6,347) (86,894) - - $3.29
MOUNTAIN VIEW
A 22 2,196,395 102,863 28,352 67,292 13,908 212,415 9.7% 6.2% (20,498) 49,588 - - $3.48
B 45 1,085,736 190,919 6,060 8,477 3,913 209,369 19.3% 22.1% 3,225 (24,627) - - $2.47
C 45 482,537 23,776 - 10,273 - 34,049 7.1% 11.6% 8,107 5,857 - - $2.54
TOTAL 112 3,764,668 317,558 34,412 86,042 17,821 455,833 12.1% 11.5% (9,166) 30,818 - - $2.91

PALO ALTO
A 63 2,806,466 251,592 79,066 316,654 10,780 658,092 23.4% 17.2% 6,940 (91,296) - 196,853 $4.78
B 104 2,400,415 262,567 110,024 49,452 4,283 426,326 17.8% 22.9% 14,546 (68,447) - - $3.52
C 83 929,756 59,231 7,028 20,408 1,911 88,578 9.5% 11.1% 2,280 (63) - - $3.05
TOTAL 250 6,136,637 573,390 196,118 386,514 16,974 1,172,996 19.1% 18.5% 23,766 (159,806) - 196,853 $4.30

SAN JOSE
A 82 11,056,043 2,351,276 85,885 1,026,831 162,823 3,626,815 32.8% 32.7% (105,874) 342,046 - 172,007 $2.55
B 239 8,586,576 1,208,285 17,369 190,394 13,823 1,429,871 16.7% 15.7% (115,162) (210,964) - - $1.91
C 187 4,193,337 693,868 3,132 117,101 - 814,101 19.4% 19.8% 21,302 44,900 - - $1.67
TOTAL 508 23,835,956 4,253,429 106,386 1,334,326 176,646 5,870,787 24.6% 24.3% (199,734) 175,982 - 172,007 $2.28

SANTA CLARA
A 31 4,431,204 544,923 256,866 125,049 232,137 1,158,975 26.2% 18.0% (184,012) 144,973 - 365,000 $2.59
B 130 4,050,125 1,053,318 52,306 73,994 14,408 1,194,026 29.5% 29.6% (10,964) (154,693) - - $1.72
C 40 660,949 143,996 - 8,400 - 152,396 23.1% 22.5% (1,233) (30,998) - - $1.26
Total 201 9,142,278 1,742,237 309,172 207,443 246,545 2,505,397 27.4% 23.5% (196,209) (40,718) - 365,000 $2.20

SUNNYVALE
A 35 5,325,330 2,224,585 342,698 6,272 266,082 2,839,637 53.3% 51.8% (99,570) (138,306) - 179,739 $3.21
B 57 1,372,356 185,109 7,198 93,230 - 285,537 20.8% 14.1% 11,332 (9,152) - - $2.00
C 24 471,440 132,423 - - - 132,423 28.1% 28.1% - (19,844) - - $1.97
TOTAL 116 7,169,126 2,542,117 349,896 99,502 266,082 3,257,597 45.4% 43.0% (88,238) (167,302) - 179,739 $3.07

SILICON VALLEY TOTALS
A 300 29,021,989 6,209,174 906,114 1,665,813 710,622 9,491,723 32.7% 30.0% (504,940) 151,233 - 916,856 $2.94
B 810 23,449,538 3,851,930 264,751 613,803 39,177 4,769,661 20.3% 20.0% (191,558) (543,007) - - $2.12
C 517 8,620,832 1,263,783 10,374 163,132 1,911 1,439,200 16.7% 17.0% 6,394 (123,297) - - $1.81
TOTAL 1,627 61,092,359 11,324,887 1,181,239 2,442,748 751,710 15,700,584 25.7% 24.3% (690,104) (515,071) - 916,856 $2.63

QUARTERLY COMPARISON AND TOTALS

3Q-10 1,627 61,092,359 11,324,887 1,181,239 2,442,748 751,710 15,700,584 25.7% 24.3% (690,104) (515,071) - 916,856 $2.63
2Q-10 1,627 61,092,359 11,156,073 968,025 2,120,150 617,067 14,861,315 24.3% 24.7% 483,557 175,033 343,349 914,494 $2.65
1Q-10 1,625 60,749,010 11,391,293 1,163,064 1,798,898 627,680 14,980,935 24.7% 24.6% (308,524) (308,524) - 1,059,908 $2.67
4Q-09 1,625 60,749,010 11,190,686 1,058,841 1,774,345 919,023 14,942,895 24.6% 25.1% 379,539 (2,518,890) - 1,076,398 $2.66
3Q-09 1,625 60,749,010 11,490,436 1,383,243 1,437,527 938,664 15,249,870 25.1% 24.1% (708,234) (3,254,328) 485,094 1,104,851 $2.74

R&D, INDUSTRIAL & WAREHOUSE MARKET STATISTICS
THIRD QUARTER 2010
EXISTING PROPERTIES VACANT AVAILABLE OCCUPIED AVAILABLE TOTAL AVAILABILITY NET ABSORPTION CONSTRUCTION RENT
Type Bldgs
Total Inventory
Sq Ft
Direct Vacant
Sublease
Vacant
Direct Occupied
Sublease
Occupied
Sq Ft
Rate
Q3-2010
Rate
Q2-2010
Q3-2010 YTD
Completed
Q3-2010
Under
Constr
NNN
Wtd Avg
Asking
S U B MA R KET S

CAMPBELL
R&D 69 1,462,027 229,938 - 110,838 - 340,776 23.3% 27.6% (3,870) (44,316) - - $0.88
IND 40 465,815 70,454 - 12,317 - 82,771 17.8% 12.1% (28,177) (21,738) - 1,636 $1.11
TOTAL 109 1,927,842 300,392 - 123,155 - 423,547 22.0% 23.8% (32,047) (66,054) - 1,636 $1.11

CUPERTINO
R&D 50 3,439,813 232,056 - 76,479 - 308,535 9.0% 8.8% (15,000) (151,942) - - $1.78
TOTAL 50 3,439,813 232,056 - 76,479 - 308,535 9.0% 8.8% (15,000) (151,942) - - $1.78

FREMONT
R&D 345 18,649,034 4,209,428 89,261 394,053 255,743 4,948,485 26.5% 26.6% (208,341) (517,231) - 118,535 $0.79
IND 353 8,682,412 394,342 30,700 112,632 - 537,674 6.2% 5.9% (41,848) (89,045) - - $0.65
WSE 50 7,638,159 498,894 27,313 177,380 - 703,587 9.2% 8.0% (19,492) (88,632) - - $0.43
TOTAL 748 34,969,605 5,102,664 147,274 684,065 255,743 6,189,746 17.7% 17.4% (269,681) (694,908) - 118,535 $0.73

GILROY
R&D 9 373,694 27,216 - 54,670 - 81,886 21.9% 21.9% - 50,000 - - $0.95
IND 72 1,342,937 177,005 - 180,458 - 357,463 26.6% 27.3% 9,016 (12,823) - - $0.56
WSE 18 3,224,101 169,341 - - - 169,341 5.3% 5.3% - - - - $0.38
TOTAL 99 4,940,732 373,562 - 235,128 - 608,690 12.3% 12.5% 9,016 37,177 - - $0.54

LOS GATOS
R&D 20 475,159 89,268 24,952 - - 114,220 24.0% 27.5% 9,969 15,607 - - $1.33
TOTAL 20 475,159 89,268 24,952 - - 114,220 24.0% 27.5% 9,969 15,607 - - $1.33

MILPITAS
R&D 233 14,005,916 2,407,522 782,980 224,970 162,683 3,578,155 25.5% 25.1% (168,770) (34,187) - - $0.74
IND 117 2,872,595 342,487 35,273 105,334 - 483,094 16.8% 23.6% 2,962 (37,481) - - $0.60
WSE 37 4,761,248 594,025 71,229 344,567 - 1,009,821 21.2% 22.8% (71,587) (260,776) - - $0.43
TOTAL 387 21,639,759 3,344,034 889,482 674,871 162,683 5,071,070 23.4% 24.4% (237,395) (332,444) - - $0.66

MORGAN HILL
R&D 62 2,688,925 331,153 - 118,107 - 449,260 16.7% 17.2% - 26,789 - - $0.78
IND 77 2,042,576 270,489 - 93,956 - 364,445 17.8% 18.1% 4,870 (6,782) - - $0.70
WSE 5 384,880 46,970 - 47,000 - 93,970 24.4% 24.4% - (45,033) - - $0.55
TOTAL 144 5,116,381 648,612 - 259,063 - 907,675 17.7% 18.1% 4,870 (25,026) - - $0.70

MOUNTAIN VIEW
R&D 274 13,971,801 998,695 480,640 627,815 79,270 2,186,420 15.6% 14.0% (136,558) (64,758) - - $1.48
IND 148 2,698,054 191,483 - 53,623 - 245,106 9.1% 8.3% (40,397) (61,818) - - $0.81
TOTAL 422 16,669,855 1,190,178 480,640 681,438 79,270 2,431,526 14.6% 13.0% (176,955) (126,576) - - $1.44

PALO ALTO
R&D 59 10,292,315 1,000,238 300,035 209,798 30,500 1,540,571 15.0% 17.8% 122,473 (802,998) - - $2.49
TOTAL 59 10,292,315 1,000,238 300,035 209,798 30,500 1,540,571 15.0% 17.8% 122,473 (802,998) - - $2.49

SAN JOSE
R&D 645 47,449,305 9,336,415 998,602 1,403,815 70,678 11,809,510 24.9% 25.6% 193,864 (706,470) - - $0.96
IND 1,089 22,646,103 1,854,394 30,459 492,192 96,397 2,473,442 10.9% 9.8% (337,006) (482,610) - - $0.64
WSE 179 16,365,906 1,240,748 47,250 315,746 52,080 1,655,824 10.1% 10.2% (95,121) (338,930) - - $0.47
TOTAL 1,913 86,461,314 12,431,557 1,076,311 2,211,753 219,155 15,938,776 18.4% 18.5% (238,263) (1,528,010) - - $0.88

SANTA CLARA
R&D 374 21,787,116 2,777,548 390,587 904,282 3,300 4,075,717 18.7% 16.8% (365,744) (788,351) - - $1.07
IND 615 11,000,628 929,119 18,100 108,962 1,415 1,057,596 9.6% 9.9% 9,348 (90,329) - - $0.75
WSE 30 3,229,532 - - 57,060 - 57,060 1.8% 4.9% 72,689 100,812 - - $0.41
TOTAL 1,019 36,017,276 3,706,667 408,687 1,070,304 4,715 5,190,373 14.4% 13.6% (283,707) (777,868) - - $1.02

SUNNYVALE
R&D 507 23,632,946 2,360,188 193,950 470,956 4,500 3,029,594 12.8% 13.2% 5,026 (145,769) - - $1.21
IND 186 3,349,093 434,761 13,820 45,630 1,700 495,911 14.8% 14.6% (17,694) (46,227) - - $0.68
WSE 34 2,606,972 91,060 - - - 91,060 3.5% 6.1% 68,190 20,490 - - $0.59
TOTAL 727 29,589,011 2,886,009 207,770 516,586 6,200 3,616,565 12.2% 12.7% 55,522 (171,506) - - $1.14

SILICON VALLEY TOTALS
R&D 2,647 158,228,051 23,999,665 3,261,007 4,595,783 606,674 32,463,129 20.5% 20.6% (566,951) (3,163,626) - 118,535 $1.03
IND 2,828 56,386,252 4,842,563 128,352 1,387,076 99,512 6,457,503 11.5% 11.3% (422,226) (832,282) - 1,636 $0.68
WSE 361 38,696,973 2,641,038 145,792 941,753 52,080 3,780,663 9.8% 10.2% (45,321) (572,439) - - $0.45
TOTAL 5,836 253,311,276 31,483,266 3,535,151 6,924,612 758,266 42,701,295 16.9% 16.9% (1,034,498) (4,568,347) - 120,171 $0.94

COLLIERS INTERNATIONAL
450 West Santa Clara Street
San Jose, CA 95113
TEL + 1 408 282 3800
FAX + 1 408 292 8100

Sjc.all.

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (10)

Similar to Sjc.all.

Similar to Sjc.all. (20)

More from Coy Davidson

More from Coy Davidson (20)

Sjc.all.